Nomura Research now expects Norges Bank to make one more policy rate cut, in December 2026, taking the rate to 3.75%. This follows higher-than-expected January inflation in Norway and stronger wage growth.
In January, CPI-ATE inflation rose by 0.3pp to 3.4% year-on-year, versus forecasts of 2.9% from Nomura and Norges Bank, and 3.0% consensus. CPI inflation rose by 0.4pp to 3.6% year-on-year, compared with 3.2% Nomura, 2.7% Norges Bank, and 3.0% consensus.
Inflation Outlook And Policy Path
Nomura expects wage growth to keep inflation sticky into 2026, even if it slows over time. Under this view, the projected 3.75% policy rate would be above Norges Bank’s long-run neutral range of 2.25% to 3.50%.
One risk cited is the Norwegian krone’s recent rise against the US dollar and the euro, which could lower imported inflation. Nomura says it has already factored in slower goods price rises and still expects inflation to ease gradually, supporting one remaining cut.
Based on the unexpectedly high inflation figures for January 2026, we must recalibrate our strategy for the coming weeks. The data shows underlying inflation hitting 3.4% and headline inflation at 3.6%, both significantly above what we and Norges Bank had forecasted. This indicates that price pressures are not cooling as anticipated, forcing a major rethink of the central bank’s path.
This persistent inflation is supported by strong wage growth, a trend we observed throughout 2025 when wage settlements averaged over 5%. That momentum is clearly carrying into this year, suggesting inflation will remain stubbornly high for longer than previously modeled. Consequently, the market should stop pricing in multiple rate cuts and instead prepare for a single, delayed cut, likely not until December 2026.
Market Strategy Implications
For interest rate traders, this means instruments pricing in rate cuts for the summer or autumn of 2026 are misaligned with the new reality. We should consider paying fixed on Norwegian interest rate swaps or selling forward rate agreements for the latter half of the year. The yield on the 2-year Norwegian government bond, currently around 4.1%, will likely face upward pressure as the market digests this hawkish shift.
In the foreign exchange market, this reinforces a bullish stance on the Norwegian krone. The prospect of Norges Bank holding rates at 4.0% for most of the year, while other central banks like the ECB may be cutting, enhances the NOK’s carry trade appeal. We see potential for further appreciation, particularly in the EUR/NOK cross, which has already fallen from over 12.00 in mid-2025 to around 11.25 today.
For equity derivatives, sustained high interest rates present a headwind for the Oslo Børs OBX Index. Higher borrowing costs could squeeze corporate margins, making bearish positions more attractive. We could look at buying put options on the OBX as a hedge or a speculative play on the market reacting to tighter-for-longer monetary policy.
The main risk to this view remains the krone’s own strength, which could eventually cool inflation by making imports cheaper. While the NOK has appreciated against the dollar and euro recently, this disinflationary pressure may not be enough to offset domestic price drivers in the short term. Therefore, we should monitor import price data closely but maintain our core position that rates will stay elevated.
